Delayed payments leave holes in town budgets, analysis shows

"It's not uncommon to have surprises," says Jefferson Murphree, Riverhead's building and planning administrator, of the shortfalls and windfalls on building fees. He was in his office on April 22, 2016. Photo Credit: Randee Daddona

"It's not uncommon to have surprises," says Jefferson Murphree, Riverhead's building and planning administrator, of the shortfalls and windfalls on building fees. He was in his office on April 22, 2016. (Credit: Randee Daddona)

Municipal budget officials across Long Island overestimated revenue from building permits and fees in the past two years, creating hundreds of thousands of dollars in shortfalls, a Newsday analysis has found.

Development project delays, lawsuits, environmental issues and a slowdown in the post-Sandy building boom delayed payments that town and city budgets had counted on.

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Municipal budget officials across Long Island overestimated revenue from building permits and fees in the past two years, creating hundreds of thousands of dollars in shortfalls, a Newsday analysis has found.

Development project delays, lawsuits, environmental issues and a slowdown in the post-Sandy building boom delayed payments that town and city budgets had counted on.

Building permit revenue projections in 2014 fell short by roughly $2.6 million in six towns and cities, Newsday’s analysis of Long Island’s 13 towns and two cities found. North Hempstead’s $800,000 shortfall was the biggest, followed by Islip’s $782,000 gap. Last year, five municipalities missed revenue projections by a total of almost $1.9 million, led by Islip’s $1.3 million and followed by Riverhead’s $258,000.

As a result, money from other areas had to be moved around to cover the permit revenue holes in general budgets. Some towns made up for the deficits by exceeding revenue projections in other budget line items, or bounced back in the next year when the delayed construction started.

The revenue shortfalls come after an Islandwide building boom in 2013, the year after superstorm Sandy led to widespread rebuilding and repair projects.

An architectural rendering of Peconic Crossing designed for the heart of downtown Riverhead. Photo Credit: Conifer Real Estate Development

Towns without building-fee budget gaps exceeded their revenue projections by budgeting conservatively. Others continued to see high revenue related to continued post-Sandy rebuilding and repairs.

In Riverhead, the discovery of a buried pipe at the site of a proposed apartment complex extended the town’s review process and delayed construction. In other areas, litigation postponed residential projects, including piazza-style apartments around a public square in downtown Glen Cove and the rezoning of a dairy farm for age-restricted condominiums in Elwood.

“Some of these projects are anticipated, and for whatever reason they don’t make it to the table,” said North Hempstead Planning Commissioner Michael Levine. “We’re always up against meeting the number.”

Figuring out how much commercial building project revenue to budget can be a guessing game, officials said.

Developers meet with municipal planners during the summer to pitch projects ranging from small efforts such as a mental health facility on a former Grumman Corp. site in Riverhead where military aircraft were built and tested to more ambitious proposals such as the first hotel to be built in Port Washington. Based on the proposals’ timelines, budget officials set projections for the following year when developers must line up contractors, draw up site plans, gain approval from several land-use boards, and secure interest rates for construction loans.

“You talk to developers and test the temperatures of developers, and we look to see what their time frames are,” Glen Cove Building Department Director Richard Summa said. The city recorded a $143,000 building permit revenue shortfall in 2014.

But those plans can be delayed by a municipality’s demands or broader economic conditions, officials said. Opposition from residents and concerns of public safety officials also can lead to a lengthy review.

“It’s not uncommon to have surprises,” said Jefferson Murphree, Riverhead’s building and planning administrator. The tough part about projecting the revenue “is not knowing when a project is going to get approved by a planning board or town board,” he said.

In 2014, Huntington Town missed its building permit revenue projection by more than $473,000. Smithtown recorded a $392,000 shortfall.

Last year, Riverhead had a $258,000 shortfall, and Huntington had $151,000 in missed revenue. North Hempstead posted a $100,000 shortfall in 2015 after missing the projection by $800,000 in 2014.

Long Beach surpassed its revenue projection by more than $250,000 in the 2014-2015 fiscal year. Hempstead Town exceeded its budget by nearly $2 million that year, and by $3 million in 2015. Town of Oyster Bay officials attributed a $1.3 million surplus in 2014 and a $600,000 surplus in 2015 to increased Sandy-related building applications.

Islip officials, however, overestimated the effect Sandy applications would have on revenue for 2014. The town, which posted a $782,000 shortfall in 2014, recorded a $1.3 million shortfall in 2015.

On the East End, where residential building and renovations regularly outpace much of the rest of the Island, Southampton exceeded its $2.2 million projection by nearly $953,000 in 2014. East Hampton took in $481,000 more than the $875,000 budget.

Budgeting for residential building is a challenge because of its unpredictability, officials said.

“It’s relying on individual projects, individual homeowners to do something. You’re at the whim then of the individual homeowner’s financial situation,” said Mitchell Pally, chief executive of the Long Island Builders Institute, an Islandia trade association representing builders, developers and remodelers.

In North Hempstead, building officials lost $1.2 million in 2014 revenue to a town law exempting homeowners from a penalty that would have quadrupled fees for repairing code violations. Building officials said the amnesty was designed to encourage residents to address old violations.

Delays in commercial development projects accounted for the majority of the shortfalls, officials said.

In Huntington, residents sued to reverse the rezoning for the Seasons at Elwood, a 256-unit complex for 55 and older approved in August 2014. The lawsuit failed, but the developer is still waiting for the town board’s site plan approval, officials said.

A proposal to demolish the FedEx and TV55 headquarters in Melville, to be replaced by a six-floor retail and commercial building, has lingered since 2011 because of concerns from the Melville Fire Department over access for emergency vehicles. Permits have yet to be issued for construction, town officials said.

“You allot a certain amount of time for them to get their financing in place,” Huntington Planning Director Tony Aloisio said. Often, he added, “the construction doesn’t occur on the timetable they project to you.”

In Riverhead, four projects expected to be constructed in 2015 were delayed to this year, but the revenue was built into last year’s budget. They include renovating the facade of Tanger 1, a section of the popular outlet mall in Riverhead, and the construction of Peconic Care at the Enterprise Park at Calverton, known as EPCAL, where Grumman Corp. had built and tested military aircraft.

Developers of the Peconic Care property had to manage clearing and drainage issues, and gain access to River Road. A U.S. Navy property blocked access to the road, and developers opted to build on another parcel of land they owned to create a direct route to River Road, Murphree said.

A 48-unit affordable housing complex in downtown Riverhead, which offers priority to artists displaced by superstorm Sandy, was held up by a lengthy review period, officials said. The developers for Peconic Crossing needed permits from the state Department of Environmental Conservation and to conform with the town’s architectural requirements for the downtown corridor.

A “hidden surprise” was the discovery of an underground pipe during a town site inspection, Murphree said. After talks with town officials, developer Conifer Realty offered to replace the storm drain pipe and install a filtration system to protect the river, Murphree said.

Glen Cove city officials cited delays in two projects as being a major part of budget shortfalls: The Piazza in the city’s downtown and another housing project, The Mews. Developers of The Mews projected constructing six of the nine planned buildings by 2015, building department director Summa said, but they built five. Construction on the Piazza project has yet to start after lawsuits from the neighboring Village of Sea Cliff and the current owner of the site.

“You always have to be very conservative in the numbers you put out there, lots of things can happen between thinking about a development project and actually developing a project,” Pally said.